09: Is Your Side Gig a Hobby or a Business? Tax Facts You Should Know

Side hustles are more popular than ever. From rideshare driving to selling crafts online, people are finding creative ways to supplement their income. But if your side gig starts generating serious cash, you may suddenly have some not-so-fun tax obligations. So how do you know if your hobby has crossed into business territory in the eyes of the taxman? What happens if you start racking up losses from your entrepreneurial experiments? Can you reduce the tax on your regular salary? Finding clarity on these issues is critical. Get it wrong and you could face penalties, interest as well as the tax bill! In this episode, Sally demystifies the complex issue of hobby vs business taxation. With her tax wisdom and personal experience moonlighting as a gym instructor, Sally provides practical insights for side hustlers.

So how do you know if your hobby has crossed into business territory in the eyes of the taxman? What happens if you start racking up losses from your entrepreneurial experiments? Can you reduce the tax on your regular salary?

Finding clarity on these issues is critical. Get it wrong and you could face penalties, interest as well as the tax bill!

In this episode, Sally demystifies the complex issue of hobby vs business taxation. With her tax wisdom and personal experience moonlighting as a gym instructor, Sally provides practical insights for side hustlers.

In this episode of the Smarten Up! The Tax and Business Podcast, you’ll learn:

The difference between a hobby and a business for tax purposes. (00:54)
Factors that determine if an activity is a business or a hobby. (02:34)
Tax treatment and obligations if deemed a hobby vs. a business. (04:21)
Non-commercial loss rules for claiming business losses. (09:20)
Examples of applying the non-commercial loss rules. (13:12)
Key takeaways. (16:58)

Understanding if your side hustle is a hobby or business is crucial for tax compliance and unlocking key deductions. As Sally summarised, you need to evaluate your activities against factors like profit motive, repetition, systems, record keeping and more.